Restrictive Covenants and the Decision of Kay v Cunningham

In this article we will consider the implications of the decision in Kay v Cunningham which highlights the Upper Tribunal’s discretion to modify and discharge restrictive covenants.

Restrictive Covenants

A restrictive covenant is a covenant that prevents certain acts from taking place on a landowner’s land (the land with the burden of the restriction). They are intended to preserve the value and enjoyment of the adjoining land (the land with the benefit of the restriction).

Restrictive covenants exist in perpetuity and are affixed to the land. The only ways in which to vary or remove these are therefore through the following avenues:

1. Negotiations between the relevant land owners for a release;
2. Applications to the Court (under section 84(2) of the Law of Property Act 1925); or,
3. Applications to the Upper Tribunal (under section 84(1) of the Law of Property Act 1925).

Upper Tribunal

The Upper Tribunal (Lands Chambers) has the discretion to modify or discharge a restrictive covenant in reliance of one of the following grounds under Section 84(1) of the Law and Property Act 1925:

• The Covenant is obsolete;
• The Covenant impedes some reasonable use of the land;
• Agreement by all persons entitled to the benefit of the covenant; or,
• The discharge or modification will cause no injury.

Kay v Cunningham

The case Kay v Cunningham involved a Grade II listed building known as Lea Hurst, the former home of Florence Nightingale and therefore a building of historical significance.

The applicant was looking to turn Lea Hurst into a bed & breakfast, letting out five bedrooms to fee paying guests. This was in breach of the restrictive covenant that outlined that the property could not be used as anything other than a single private residence.

Following an injunction sought by the owner of neighbouring land, the applicant sought to modify the covenant, through an application to the Upper Tribunal, and in doing so the applicant relied on the second ground, that the covenant impeded some reasonable use of the land.

The Upper Tribunal was required to consider a three limb test:

1. Was the proposed change reasonable?
2. Did the change confer substantial value?
3. Would the change cause damage to the neighbours, and if so, to what extent?

The decision of the Upper Tribunal

Tribunal decided that the use of a number of rooms, in a large heritage property, was a reasonable use and that use was impeded by the restriction. They also found that the covenant did not secure practical benefit and, even if did, there was no substantial value as no compensation had been sought by the Respondent. They therefore exercised their discretion in favour of the applicant and granted a modification of the covenant.

Conclusion

This case demonstrates a leniency on the part of the Upper Tribunal which may make it a more appealing process for landowners, particularly those with the burden of restrictions, going forward.

Aimée Redican is a Solicitor in our Property Litigation team.  For further information, please contact Aimée on 0121 233 4333 or at [email protected].